Summit Notebook
Exclusive outtakes from industry leaders
Cure for lending constipation needed
Yes, the market for IPOs is opening up, investors are regaining confidence and the worst seems to be over, but challenges are still looming and there’s a dire need for a change in regulation. Or so suggested Shuaa Capitals’ chief Sameer al-Ansari.
“With the balance sheet of banks, whatever is keeping them constipated, we need to give them something to start. Banks have to be more comfortable and confident that there are no more shocks on the horizon,” said Ansari at the Reuters Middle East Investment Summit in Dubai on Tuesday.
The right provisions need to be made — and that means more acknowledgment of non-performing loans — in turn bringing adequacy ratios down, so that banks get a boost and start lending again, Ansari noted.
“We need to open the tap a bit, even if its a drip,” the banking exec said, using hand gestures to illustrate his point. “We can’t have growth in the economy if its negative.”
Ansari, who’d made recommendations – simple to drastic – to decision makers in Dubai, suggesting solutions, cited the Irish example of gathering all bad debts linked to real estate and placing them in a government bank.
“It should be looked at here. If that’s what’s making the banks constipated, then lets do it!” he says.
Dubai, one of seven emirates that make-up the UAE federation, was hard hit by the global financial downturn and endured billions of dollars in projects cancellations, not to mention the $25 billion debt restructuring of Dubai World.
With end of TARP, investigations into fraud take center stage
While the much maligned $700 billion Troubled Asset Relief Program (TARP) has officially ended, not everything has wrapped up — auditors are just starting to hit their stride investigating scores of cases of possible malfeasance.
Neil Barofsky, special inspector general for the program, nicknamed SIGTARP, said his office has more than 120 criminal investigations underway. They are looking into whether the money loaned to financial institutions and automakers was used properly or not, if there was fraud in applications for TARP financial backing and other wrongdoing.
“Our focus on investigations is growing and that’s an area where we are definitely in a ramp-up phase,” Barofsky told the Reuters Washington Summit. “The crimes that have been committed were committed in 2008, 2009 and 2010. The most common statute of limitation for fraud is five years and there’s a reason for that, it takes a while for these type of sophisticated while collar investigations … to hit, for fraud to be discovered and it takes a while to investigate them.”
Barofsky lamented that finding experienced people willing to come to work for a temporary agency was proving to be a challenge.
“We’re looking for experienced, white collar investigators who want to come over to a temporary agency, that is not the deepest of pools, to be honest with you, if I could find more I would hire more,” he said.
Additionally, Barofsky plans to launch an after-action audit of the U.S. Treasury Department’s role in General Motors’ initial public offering, which would include examining the decision-making process and whether it maximized the return for taxpayers.
“I expect it will be a broad inquiry that goes into this. In many ways, this is a pretty unprecedented activity for a government to be selling its shares to the public in an IPO like this,” he said, adding that he expected other such audits of other companies that the federal government has stakes in and plan to go public.
